ARBITRAL AWARD

FINAL DRAFT SUBMITTED IN PARTIAL FULFILLMENT OF COURSE TITLED

ALTERNATE DISPURE RESOLUTION

FOR COMPLETION OF BA.LLB. (HONS.) IN ACADEMIC YEAR 2018-19

Submitted by – Vivek Mishra Submitted to – Mr. Hrishikesh Manu

Roll no – 1576 HOD, Department of ADR.
6th semester, BA.LLB (Hons.). CNLU, Patna.

05TH January 2019

Chanakya National Law University

Nyaya Nagar, Mithapur,
Patna (Bihar)

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 ACKNOWLEDGEMENT

Making a project is one of the most significant academic challenges I have ever faced. Any
attempt at any level can't be satisfactorily completed without the support and guidance of
learned people. I am overwhelmed with my gratitude to acknowledge all those who have helped
me put these ideas, well above the level of simplicity and into something concrete effectively
and moreover on time.

I am very thankful to my subject teacher, Mr. Hrishikesh Manu for his valuable help. He was
always there to show me the right track whenever I needed his help. He lent his valuable
suggestions, guidance and encouragement, on different matters pertaining to the topic. He has
been very kind and patient while suggesting me the outlines of this project and clearing my
doubts. I thank him for his overall support without which I would not have been able to
complete this project. I would also like to thank my colleagues, who often helped and gave me
support at critical junctures, during the making of this project. Last but not the least, I would
like to thank my family members for their emotional support.

VIVEK MISHRA

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 TABLE OF CONTENT

INTRODUCTION .................................................................................................................................. 4
AIMS AND OBJECTIVE....................................................................................................................... 4
HYPOTHESIS………………………………………………………………………………………….4
LIMITATIONS OF THE STUDY……………………………………………………………………...4
1. ARBITRAL AWARDS …………………………………………………………….....…………...6
2. ADVANTAGES OF ARBITRAL AWARDS .................................................................................... 7
3. CHALLENGES TO ARBITRAL AWARDS ..................................................................................... 9
4. ENFORCEMENT OF ARBITRAL AWARDS ................................................................................ 18
5. DIFFICULTIES IN ENFORCEMENT OF ARBITRAL AWARDS ............................................... 21
6. CONCLUSION …………………………………………………………………………………….22
BIBLIOGRAPHY …………………………………………………………………………………….24

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 INTRODUCTION

Arbitration is a legal process, which takes place outside the courts, but still results in a final
and legally binding decision similar to a court judgment. Arbitration is a flexible method of
dispute resolution, which can give a quick, inexpensive, confidential, fair and final solution to
a dispute. It involves the determination of the dispute by one or more independent third parties
rather than by a court. The third parties, called arbitrators, are appointed by or on behalf of the
parties in dispute. The arbitration is conducted in accordance with the terms of the parties'
arbitration agreement, which is usually found in the provisions of a commercial contract
between the parties. In this project the Researcher has tried to cover a very effective, important
and developing area of dispute settlement by means of arbitral award. Though, it is true that on
one hand it is an achievement in the field of dispute resolution between the parties without the
interference of the court in a quick, easy and cost effective manner on the other, there still
remains major challenges to its enforcement.

AIMS AND OBJECTIVES

1. To find different aspects of Arbitral Awards.

2. To find the challenges to Arbitral Awards or grounds for setting aside of Awards.
3. To find out the difficulties in enforcement of Arbitration Awards.

HYPOTHESES

1. Arbitration Award is a determination on the merits by an arbitration tribunal in

arbitration, and is analogous to the judgment in the Court of Law.
2. The award given by the arbitrator is equivalent to a decree of a court of law and
the same can be executed directly, without making it a decree of the court.

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RESEARCH METHODOLOGY

I have used doctrinal method of Research. Doctrinal method will include library sources.

i.) Primary Source

 Constitution of India

ii.) Secondary Sources

 Journals
 Websites
 Books

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 CH.1 ARBITRAL AWARD

Arbitration Award is a determination on the merits by an arbitration tribunal in arbitration, and

is analogous to the judgment in the Court of Law. Arbitration is particularly a means of dispute
resolution in the commercial sphere. One of the reasons for doing so is that in international
trade it is often easier to enforce a foreign arbitral award than to enforce a judgment of the
Court. The closing decades of the twentieth century saw arbitration gain worldwide acceptance
as the normal means of resolving commercial disputes. National laws on arbitration have been
modernized on all continents. The Arbitration & Conciliation Act, 1996 is one such step by
India to make the arbitration law more responsive to contemporary requirements, taking into
account the Model law and Rules adopted by the United Nations Commission on International
Trade Law (UNCITRAL). International treaties on arbitration have been signed or adhered to
with impressive success. With the gradual removal of political and trade barriers and the rapid
globalization of the world economy, new challenges have been created for arbitration
institutions in response to the growing demand of parties for certainty and predictability,
greater rapidity and flexibility as well as neutrality and efficacy in the resolution of disputes.

Arbitration is a legal process, which takes place outside the courts, but still results in a final
and legally binding decision similar to a court judgment. Arbitration is a flexible method of
dispute resolution, which can give a quick, inexpensive, confidential, fair and final solution to
a dispute. It involves the determination of the dispute by one or more independent third parties
rather than by a court. The third parties, called arbitrators, are appointed by or on behalf of the
parties in dispute1. The arbitration is conducted in accordance with the terms of the parties'
arbitration agreement, which is usually found in the provisions of a commercial contract
between the parties. For an arbitration to take place, the disputing parties must agree to take
their dispute to arbitration. In practice, this agreement is often made before the dispute arises
and is included as a clause in their commercial contract. In signing a contract with an arbitration
clause, the parties are agreeing that their dispute will not be heard by a court but by a private
individual or a panel of several private individuals. If parties have agreed to arbitration, they
will generally have to go to arbitration rather than court as the courts will normally refuse to
hear their case by staying it to force the reluctant party to honour their agreement to arbitrate.

1
I.e. the Arbitration & Conciliation Act 1996 (No 26 of 1996) (‘the 1996 Act’).

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CH.2 ADVANTAGES OF ARBITRAL AWARD

Among the available dispute resolution alternatives to the courts, arbitration is by far the
most commonly used internationally. The reasons for this are clear i.e final, binding
decisions2. While several mechanisms can help parties reach an amicable settlement - for
example through mediation or conciliation - all of them depend, ultimately, on the goodwill
and cooperation of the parties. A final and enforceable decision can generally be obtained
only by recourse to the courts or by arbitration. Because arbitral awards are not subject to
appeal, they are much more likely to be final than the judgments of courts of first instance.
Although arbitral awards may be subject to being challenged, the grounds of challenge
available against arbitral awards are limited. The award given by the arbitrator is equivalent
to a decree of a court of law and the same can be executed directly, without making it a
decree of the court.

International recognition of arbitral awards

Arbitral awards enjoy much greater international recognition than judgments of national
courts. About 120 countries have signed the 1958 United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, known as the "New York
Convention". The Convention facilitates enforcement of awards in all contracting states.
There are several other multilateral and bilateral arbitration conventions that may also help
enforcement.

Neutrality

In arbitral proceedings, parties can place themselves on an equal footing in five key respects:

1. Place of arbitration,
2. Language used,
3. Procedures or rules of law applied,
4. Nationality and Legal representation.

2
I.e. the Arbitration & Conciliation Act 1996 (No 26 of 1996) (‘the 1996 Act’).

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 5. Arbitration may take place in any country, in any language and with arbitrators of any
nationality.

With this flexibility, it is generally possible to structure a neutral procedure offering no undue
advantage to any party.

Specialized Competence of Arbitrators

Judicial systems do not allow the parties to a dispute to choose their own judges3. In contrast,
arbitration offers the parties the unique opportunity to designate persons of their choice as
arbitrators, provided they are independent. This enables the parties to have their disputes
resolved by people who have specialized competence in the relevant field.

Speed and economy

Arbitration is faster and less expensive than litigation in the courts. Although a complex
international dispute may sometimes take a great deal of time and money to resolve, even by
arbitration, the limited scope for challenge against arbitral awards, as compared with court
judgments, offers a clear advantage. Above all, it helps to ensure that the parties will not
subsequently be entangled in a prolonged and costly series of appeals. Furthermore,
arbitration offers the parties the flexibility to set up proceedings that can be conducted as
quickly and economically as the circumstances allow.

Confidentiality

Arbitration hearings are not public, and only the parties themselves receive copies of the
awards.

3
I.e. the Arbitration & Conciliation Act 1996 (No 26 of 1996) (‘the 1996 Act’).

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CH.3 CHALLENGES TO ARBITRAL AWARDS

In January 1996, India enacted a new Arbitration Act4. This Act repealed all the three previous
statutes (the 1937 Act, the 1961 Act and the 1940 Act).5 The new Act has two significant parts.
Part I provides for any arbitration conducted in India and enforcement of awards there under.
Part II provides for enforcement of foreign awards. Any arbitration conducted in India or
enforcement of award there under (whether domestic or international) is governed by Part I,
while enforcement of any foreign award to which the New York Convention or the Geneva
Convention applies, is governed by Part II of the Act.

Domestic Arbitral Award

Part I of the 1996 Act is modelled on the UNCITRAL Model Law6 and the UNCITRAL
Arbitration Rules7 with few departures. The relevant provisions are briefly outlined below.
Section 13 of the 1996 Act, corresponding to Art 13 of the Model Law, provides for challenge
to an arbitrator on the ground of lack of independence or impartiality or lack of qualification.
In the first instance, a challenge is to be made before the arbitral tribunal itself. If the challenge
is rejected, the tribunal shall continue with the arbitral proceedings and make an award. Section
13(5) of the 1996 Act provides that where the tribunal overrules a challenge and proceeds with
the arbitration, the party challenging the arbitrator may make an application for setting aside
the arbitral award under s 34 of the 1996 Act (corresponding to Art 34 of the Model Law).
Hence, approach to a court is only at the post-award stage. This is a departure from the Model
Law which provides for an approach to the court within 30 days of the arbitral tribunal rejecting
the challenge. The second departure from the Model Law (relevant to enforcement) is to be
found in S. 16 of the 1996 Act (corresponding to Art 16 of the Model Law). Section 16
incorporates the competence-competence principle and enables the arbitral tribunal to rule on
its jurisdiction, including with respect to the existence or validity of the arbitration agreement.
If the arbitral tribunal rejects any objection to its jurisdiction, or to the existence or validity of

4
I.e. the Arbitration & Conciliation Act 1996 (No 26 of 1996) (‘the 1996 Act’).
5
I.e. the Arbitration & Conciliation Act 1996 (No 26 of 1996) (‘the 1996 Act’),S. 85.
6
I.e. the United Nations Commission on International Trade Law Model Law on International
Commercial Arbitration, General Assembly Resolution 40/72, adopted on 11 December 1985 (‘the
Model Law’).
Arbitration Rules of the United Nations Commission on International Trade Law (‘UNCITRAL’),
7

General Assembly Resolution 31/98, adopted on 15 December 1976 (‘the UNCITRAL Arbitration
Rules’).

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the arbitration agreement, it shall continue with the arbitral proceedings and make an award8.
Section 16(6) of the 1996 Act provides that a party aggrieved by such award may make an
application for setting aside the same in accordance with S.34. Article 16 of the Model Law, in
contrast, provides that where the arbitral tribunal overrules any objection to its jurisdiction, the
party aggrieved with such decision may approach the court for resolution within 30 days. The
Indian Act permits approach to the court only at the award stage (and not during the pendency
of the arbitration proceedings). Hence, Section 13(5) and 16(6) of the 1996 Act furnish two
additional grounds for challenge of an arbitral award (over and above the ones stipulated in s
34 of the 1996 Act referred to below). Section 34 of the 1996 Act contains the main grounds
for setting aside the award. It is based on Art 34 of the Model Law and, like Art 34, states that
the grounds contained therein are the ‘only’ grounds on which an award may be set aside.
However, in the Indian context the word ‘only’ prefixing the grounds is a bit of a misnomer as
two additional grounds have been created by the Act itself as mentioned above. Besides,
another ground is to be found in an ‘Explanation’ to the public policy ground in s 34. The same
reads as follows:

It is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public
policy of India if the making of the award is induced or affected by fraud or corruption or was
in violation of Section 75 or Section 81.

Section 75 referred to above is part of the conciliation scheme under the Act and states that the
conciliator and parties shall keep confidential all matters relating to the conciliation
proceedings. Section 81 prohibits any reference in arbitral or judicial proceedings to views,
suggestions, admissions or proposals, etc. made by parties during conciliation proceedings.

Save for the exception, referred to above, s 34 of the 1996 Act is a faithful reproduction of Art
34 of the Model Law.

Public policy

It is clear that, The Arbitration and Conciliation Act, 1996 was conceived by the compulsions
of globalisation leading to adoption of the United Nations Commission on International Trade
Law (UNCITRAL) Model Law. This Act is by and large an integrated version of the 1940 Act
which governed the domestic arbitration, the Arbitration (Protocol and Convention) Act, 1937

8
The 1996 Act, s 16(5).

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and the Foreign Award (Recognition and Enforcement) Act, 1961, which governed
international arbitral awards. Apparently, Chapter I to VIII of the UNCITRAL are replicas of
Chapters I to VII of the Part-I of the 1996 Act, with the difference that in the UNCITRAL the
provisions are called ‘Article’ whereas under the Act they are called ‘Section’.9 The main
objectives set out in the Statement of Objects and Reasons of the 1996 Act are “to minimise
the supervisory role of courts in the arbitral process” and “to provide that every final arbitral
award is enforced in the same manner as if it were a decree of the Court”.10

Public policy is that principle of law which holds that no subject can lawfully do, which has a
tendency to be injurious to the public or against the public good, which may be termed, as it
sometimes has been, the policy of the law or public policy in relation to the administration of
the law. Public policy connotes some matter which concerns public good and public interest.
The concept of public policy varies from time to time.11

The UNCITRAL Model Law Commission stated in its report12 that the term “public policy”
comprises “fundamental principles of justice”. It was understood that the term public policy
which was used in the 1958 New York Convention and many other treaties, covered
fundamental principles of law and justice in substantive as well as procedural respects. Thus,
instances such as corruption, bribery, or fraud and similar serious cases would constitute a
ground for setting aside an award.

In the case of Renusagar Power Plant Co. Ltd. Vs. General Electric Co.,13 the court in view
of the absence of a workable definition of “international public policy” found it difficult to
construe the expression “public policy” in Article V(2)(b) of the New York Convention to
mean international public policy as it could be, construed both in narrow or wide sense. In the
Renusagar case, it has been observed: “It is obvious that since the Act is calculated and
designed to subserve the cause of facilitating international trade and promotion thereof by
providing for speedy settlement of disputes arising in such trade through arbitration, any

9
Vikrant Tyres Ltd. v. Export Foreign Trade Co. Ltd., 2005(3) RAJ 612 (Ker)
10
Para 4 (v) and (vii) of the Statement of Objects and Reasons of the Arbitration and Conciliation Act, 1996
11
Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, AIR 1986 SC 1571. For a
very fine and detailed statement of Sir William Holdsworth on public policy please refer History of
English Law, Vol. III, p.55
12
UNCITRAL Report on the work of its 18th session, June 3-21, 1985, para.296
13
Renusagar Power Plant Co. Ltd v. General Electric Co., AIR 1994 SC 860

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expression or phrase occurring therein should receive, consisting with its literal and
grammatical sense, a liberal construction.”

The Supreme Court, while construing the term ‘public policy’ in Section 7(1)(b)(ii) of Foreign
Awards (Recognition and Enforcement) Act, applied the principles of private international law
and held that an award would be contrary to public policy if such enforcement would be
contrary to

(i) fundamental policy of Indian law; or

(ii) the interests of India; or
(iii) justice or morality.

The trend in India is similar to that in England i.e. public policy could be interpreted in a narrow
sense and a broad sense.

ONGC Vs. Saw Pipes14 case

The limited grounds of challenge provided under Section 3415 are universally recognised. It is
well accepted that the courts have no power to get into the merits of the dispute. However, this
basic proposition was put to test and suffered a setback in the case of ONGC Vs. Saw Pipes
Ltd. In this case, an award was challenged on the ground that the arbitral tribunal had
incorrectly applied the law of the land in rejecting a claim for liquidated damages.

Two errors of great magnitude that have been committed in this case are:

1. While reviewing the merits of the ONGC case,16 the court failed to consider the labour
strike in entire European continent, something which was neither under the control nor
could be predicted by SAW Pipes. This particular aspect has been completely
overlooked by the court.
2. The decision of the two judges Bench in ONGC has bypassed the ruling of the three
judges Bench of Supreme Court in the Renusagar case.

14
ONGC v. SAW Pipes Ltd., AIR 2003 SC 262
15
The Arbitration and Conciliation Act, 1996.
16
ONGC v. SAW Pipes Ltd., AIR 2003 SC 262.

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That shows both judicial indiscipline and violation of the binding precedent of a larger Bench.
While the Bench in Renusagar case held that the term ‘public policy of India’ was to be
interpreted in a narrow sense, the Division Bench went ahead unmindful of the prior precedent
and expanded the same to such an extent that arbitral awards could now be reviewed on their
merits. This is a huge step backwards in laws relating to alternate dispute resolution in the era
of globalisation. This is a reason that ONGC case is considered to be a villain in this regard
giving an open opportunity other than the limited grounds of challenge provided under Section
3417

The Supreme Court’s judgment in this case expanded the concept of public policy to add that
the award would be contrary to public policy if it was “patently illegal”. The Supreme Court
distinguished SAW Pipes case18 from that of Renusagar on the ground that the Renusagar
judgment12 was in context of a foreign award, while the ratio of SAW Pipes19 would be
confined to domestic awards only. And in the name of public policy, the court went on to re-
appreciate the question of facts, mixed question of fact and law and pure question of law, which
is most undesirable in international commercial arbitration, as it would lead to uncertainty, a
factor which no businessman in international business transaction would like to have.

It may be correctly stated that the ratio set in ONGC Vs. Saw Pipes20 makes a significant dent
in the jurisprudence of arbitration in India and has come in for some sharp nonetheless
deserving criticism. Mr. Fali S. Nariman, one of the greatest lawyers of our generation, remarks
on the judgment as having “virtually set at naught the entire Arbitration and Conciliation Act
of 1996…To have introduced—by judicial innovation—a fresh ground of challenge and placed
it under the head of ‘public policy’ was first contrary to the established doctrine of precedent—
the decision of three judges being binding on a bench of two judges. It was also contrary to the
plain intent of the new 1996 law, namely the need of finality in alternative methods of dispute
resolution without court interference. If courts continue to hold that they have the last word on
facts and on law—notwithstanding consensual agreements to refer matters necessarily

17
ONGC v. SAW Pipes Ltd., AIR 2003 SC 26299.
18
Ibid.
19
Ibid
20
Ibid.

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involving facts and law to adjudication by arbitration—the 1996 Act might as well be scrapped.
The Division Bench of two judges of the court has altered the entire road-map of arbitration
law and put the clock back to where we started under the old 1940 Act.”21

Foreign arbitral awards - Post ONGC Approach:

The Act of 1996 does not provide for challenge for foreign arbitral award specifically.
Although Section 48 and more particularly Section 48(1)(e) read with other substantive
provisions makes it abundantly clear that although it is not permissible to challenge a foreign
award, it could be resisted in its enforcement on the same grounds as are available while
challenging a domestic award. While a bare reading of Section 48(1)(e) would demonstrate
that a foreign award can be challenged in a country in which it was made or the country under
law of which it was made.

The most recent decision of the Supreme Court on the subject of setting aside an award on the
ground of public policy under Section 34 is Venture Global Engineering Vs. Satyam Computer
Services Ltd.22 Based on the earlier judgment in Bhatia International,23 the Supreme Court held
that it is open to the parties to exclude the application of the provisions of part I by express and
implied agreement, failing which the whole of part I would apply. Further, it held that to apply
Section 34 to a foreign award would not be inconsistent with Section 48 of the 1996 Act, or
any other provision of part II and that the judgment-debtor cannot be deprived of his right under
Section 34 to evoke the public policy of India, to set aside the award. Thus, the extended
definition of public policy cannot be bypassed by taking the award to foreign country for
enforcement.

On 10-1-2008 the Supreme Court rendered its decision in Satyam Computer Services Ltd.
case24 and held that even a foreign award can be challenged in India on the ground of public
policy. The decision was passed basically relying on the decision of the Court in Bhatia
International v. Bulk Trading S.A25in which it was held that Part I of the 1996 Act will also

21
From transcript of speech delivered by Mr. F. S. Nariman at the inaugural session of “Legal Reforms in
Infrastructure”, New Delhi, 2 May, 2003 – quoted in Kachwaha, Sumeet, ‘The Indian Arbitration Law : Towards
a New Jurisprudence’, Int. A.L.R. 2007, 10(1), 13-17
22
Ibid.
23
Bhatia International v. Bulk Trading SA, (2003)5 SCC 105
24
Venture Global Eng. V. Satyam Services Ltd.(2008)
25
Bhatia International v. Bulk Trading S.A.& oths. (2002)

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apply to Part II unless expressly or impliedly excluded by the parties through agreement. The
Supreme Court upheld a challenge in India to a foreign arbitration award on the grounds that
the relief contained in the award violated certain Indian statutes and was therefore contrary to
Indian public policy pursuant to Part I of the Indian Arbitration and Conciliation Act, 1996.
The case arose from a challenge in India by a US company, Venture Global Engineering
(VGE), to set aside an award rendered against it in an arbitration proceeding in London under
the rules of the LCIA. The relief in the award implicated VGE’s interests in India and called
for the transfer of certain shares that VGE owned in an Indian joint venture. VGE’s challenge
asserted that the relief in the award violated certain Indian corporate and foreign investment
statutes, specifically the Foreign Exchange Management Act, 1999, and therefore constituted
a "conflict with the public policy of India" pursuant to the general provisions contained in
Section 34 of Part I of the Arbitration Act. The court held that:

“The provisions of Part I of the Act (Arbitration and Conciliation Act, 1996) would apply to
all arbitrations including international commercial arbitrations and to all proceedings relating
thereto. We further hold that where such arbitration is held in India, the provisions of Part-I
would compulsorily apply and parties are free to deviate to the extent permitted by the
provisions of Part-I. It is also clear that even in the case of international commercial arbitrations
held out of India provisions of Part-I would apply unless the parties by agreement, express or
implied, exclude all or any of its provisions.”

The decision has important implications both for companies doing business involving India
and for companies with substantial assets located in India and for companies required to
enforce foreign arbitration awards in India. This decision has made the foreign awards open to
challenge under the grounds listed in section 34 of Part I of the Act, which includes the ground
that the award is against Indian public policy. Public policy in this sense is stated to encompass
the illegality and fundamental policy, interests, justice and morality of India. If an arbitration
agreement does not specifically exclude the application of this part of the Act, the award is
open to a challenge under the Act.

Although, scope of Part I can be avoided by the parties by accepting to the same under their
contract. However, this shall not help to as the grounds for opposing enforcement are found in
Part II of the Act. These grounds are, for the most part, the same as the grounds for challenging
the award set out in Part I. The Part II grounds are set out in section 48 of the Act and, as in
section 34, cover an award which is considered to be against Indian public policy. There is no

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case law on the point, but it is generally accepted that any attempt to exclude the effect of Part
II of the Act would fail.

Following the judgment in Venture Global Engineering, if the arbitration agreement does not
specifically exclude the application of Part I of the Act, foreign awards are open to challenge
by the losing party under the grounds listed in section 34 of Part I. However, the grounds for
opposing enforcement under Part II of the Act mirror those in Part I. Therefore an exclusion of
Part I will be ineffective where Part II applies. Part II of the Act will always apply to foreign
awards when they are enforced in India.

Therefore, although technically the judgment has not made any material changes to the status
quo in relation to enforcing foreign awards in India, it appears to have had significant practical
effects:

1. The decision is likely to result in an increase in challenges to foreign arbitral awards in

India; and
2. It has set alarm bells ringing over the extent to which India is willing to comply with
its New York Convention obligations.

This judgment of the Supreme Court is contrary to the object and scheme of the New York
Convention and also in violation of Article III of the Convention, in as much as it introduces
an additional ground for challenging a foreign award. The decision is contrary to the intention
of the Indian legislature, since it:

1. Exposes a foreign award to an additional ground of challenge, (introduced by way of

judicial legislation) meant for domestic awards only.
2. Makes provision of Section 48 of 1996 Act of enforcement of foreign award redundant,
as every time an enforcement application is filed before Indian courts under Section 48,
the opposite party would file objection under Section 34, availing the benefit of
challenging the foreign award on merits.
3. Seeks to introduce a procedure to challenge a foreign award through judicial legislation
in the absence of such a procedure under the 1996 Act.

The decision is also contrary to the precedent laid in ONGC Vs. Saw Pipes,26 wherein the court
had accepted that the scope of Section.34 and Section.48 are not identical and hence the

26
ONGC v. SAW Pipes Ltd., AIR 2003 SC 2629

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assumption of the court that the effort of the respondent was to avoid enforcement of the award
under Section 48 of 1996 Act, thereby depriving the appellant the benefit of the rule of public
policy of India, is not correct.

The Supreme Court’s intervention in the Satyam case27 on grounds of public policy is most
unfortunate, as it does not take into account the decision of the three judges Bench in Renusagar
case.28 The present decision, thus exposes foreign awards to challenge on merits on the ground
that it is “patently illegal”, notwithstanding the enforcement proceedings in any other
jurisdiction. In effect, the decision treats a foreign award as a domestic award, if the execution
of the award is to be done as per the laws of India.

Thus, it is easily inferred that the direction these decisions have taken the law on the subject
and in all such cases, the judgments depart from the spirit through judicial law making and they
disclose a lack of trust in the arbitral process.

27
Venture Global Engineering v. Satyam Computer Services Ltd., AIR 2008 SC 1061 (April)
28
Renusagar Power Plant Co. v. General Electric Co., AIR 1994 SC 860

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CH.4 ENFORCEMENT OF ARBITRAL AWARD

Domestic Arbitral Award

One of the declared objectives of the 1996 Act is that every final award: ‘is enforced in the
same manner as if it were a decree of the Court’29. Hence, the scheme of the Act is that it is up
to the losing party to object to the award and petition the court for setting it aside. The winning
party has to make no procedural move. If the objections to the award are not sustained (or if
there are no objections within the time allowed) the award itself becomes enforceable as if it
were a decree of the court30. It would be noticed that the Indian law has thus fundamentally
departed from the Model Law in this regard. The Model Law requires an application for
enforcement (Art 35) and the grounds on which enforcement of an award may be refused are
as set forth in Art 36 thereof. This has been departed from under the Indian regime as stated
above with the result, that in so far as domestic awards are concerned, if there is no application
to set aside an award under s 34 (or if the objections if made have been rejected), the award
can straightaway be executed as a decree of the court. Thus, when the period for filing
objections has expired or objections have been rejected, the award can be enforced under the
Civil Procedure Code (CPC) in the same manner as if it were a decree passed by a court of law.
Section 36 declares that an arbitral award has the force of the decree, though in fact it is not a
decree. An ex parte Award passed by an Arbitral Tribunal under Section 28 of the Act is also
enforceable under Sec. 36. Even a settlement reached by the parties under Section 30 of the
Act can be enforceable under Sec. 36 of the Act as if it is a Decree of the Court.

Foreign Arbitral Award

India's Arbitration and Conciliation Act, 1996 provides a statutory framework for the
enforcement of foreign arbitral awards given in countries which are signatories to either the
1927 Convention on the Execution of Foreign Arbitral Awards (Geneva Convention) or the
1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York
Convention). One of the prerequisites for the enforcement of a foreign arbitral award in India's

29
Statement of Objects and Reasons to the 1996 Act, para 4(vii).
30
The 1996 Act, s 36.

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courts is that it should be a foreign award under the Geneva Convention or the New York
Convention. In the case of Bhatia International vs Bulk Trading, AIR 2002 SC 1432, the
Supreme Court held that an arbitration award not made in a convention country will not be
considered a foreign award and, as such, a separate action will have to be filed on the basis of
the award.

Enforceable Awards

There are several requirements for a foreign arbitral award to be enforceable under the AC Act.

(i) Commercial transaction: The award must be given in a convention country to resolve
commercial disputes arising out of a legal relationship. In the case of RM Investment & Trading
vs Boeing, AIR 1994 SC 1136, the Supreme Court observed that the term "commercial" should
be liberally construed as having regard to manifold activities which are an integral part of
international trade.

(ii) Written agreement: The Geneva Convention and the New York Convention provide that
a foreign arbitral agreement must be made in writing, although it need not be worded formally
or be in accordance with a particular format.

(iii) Agreement must be valid: The foreign award must be valid and arise from an enforceable
commercial agreement. In the case of Khardah Company vs Raymon & Co (India), AIR 1962
SC 1810, the Supreme Court held that an arbitration clause cannot be enforceable when the
agreement of which it forms an integral part is declared illegal.

(iv) Award must be unambiguous: In the case of Koch Navigation vs Hindustan Petroleum
Corp, AIR 1989 SC 2198, the Supreme Court held that courts must give effect to an award that
is clear, unambiguous and capable of resolution under Indian law.

Unenforceable Awards

Under sections 48 and 57 of the AC Act, an Indian court can refuse to enforce a foreign arbitral
award if it falls within the scope of the following statutory defences:

(i) the parties to the agreement are under some incapacity;

(ii) the agreement is void;

(iii) the award contains decisions on matters beyond the scope of the arbitration agreement;

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(iv) the composition of the arbitral authority or the arbitral procedure was not in accordance
with the arbitration agreement;

(v) the award has been set aside or suspended by a competent authority of the country in which
it was made;

(vi) the subject matter of dispute cannot be settled by arbitration under Indian law, or

(vii) the enforcement of the award would be contrary to Indian public policy.

Enforcement and Execution of Foreign Arbitral Award

The party seeking enforcement of a foreign award under the provisions of the Act must make
an application to the court of competent jurisdiction with the following documents:

(i) the original/duly authenticated copy of the award;

(ii) the original/duly authenticated copy of the agreement, and

(iii) such evidence as may be necessary to prove that the award is a foreign award.

In the case of Fuerst Day Lawson vs Jindal Exports31, the Supreme Court held that a single
application will hold good to decide the question of the execution of the foreign arbitral award
as well as the decree of the award.

A Binding Agreement

On fulfilling the statutory conditions mentioned above, a foreign award will be deemed a decree
of the Indian court enforcing the award and thereafter will be binding for all purposes on the
parties subject to the award.

31
AIR 2001 SC 2293.

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CH.5 DIFFICULTIES IN ENFORCEMENT OF AWARDS

Main difficulties which a party experiences while seeking enforcement of an Arbitral Award
are:

1. An Arbitral Award under the 1996 Act cannot be enforced as a Decree till the period
of challenge under Sec.34 (3) is over or the objections filed have been dismissed. It is
a common practice that whenever an Arbitral Award is made, the party adversely
affected by it files a petition u/s 34 of the Act in the Court and the Court issues notice.
Then, till the time this objection petition is dismissed the said award cannot be enforced.
Given the delays in our judicial system, it almost takes years for the Objection Petition
to be disposed of and till such time the party having the arbitral award in its favour
remains in limbo. Thus, the laudable objective behind doing away of legal proceedings
to make the arbitral award a Rule of Court under the 1940 Act by introducing Sec.36 in
the 1996 Act has been diluted to a great extent. It is proposed to provide for, inter alia,
that mere filing objection petition under Sec.34 will not operate as stay of the award
and the court may grant stay of the operation of the award subject to imposition of such
conditions as it may deem fit to impose and the power to impose conditions include the
power to grant interim measures not only against the parties to the award but also
against the third parties in order to protect the interest of the party in whose favour the
award is passed.
2. The Execution procedure laid down in Order XXI of CPC is lengthy, complex and time
consuming and almost a never ending story.
3. By the time the stage of filing execution comes, the party against whom the award had
come, cleverly disposes off its assets so as to defeat the execution proceedings. Unless
a party has taken interim orders u/s 9 of the Act against disposal of assets etc. there are
good chances that by the time execution application is filed, the judgment debtor would
have practically spirited away all its assets.

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 CONCLUSION

The Parliament has enacted the Arbitration and Conciliation Act with a view to provide speedy
remedy by arbitration and to achieve this objective, section 5 of the Act puts a complete bar on
the intervention of the courts in matters where there exists an arbitration clause. The law of
arbitration in India is very much at its crossroads. As things stand today, arbitration is poised
to effect great changes to the ways in which dispute resolution is conducted. It brings with it
the solemnity and finality of the judicial process and couples it with the procedural flexibilities
of non-conventional dispute resolution methods. There is, however, an equally pressing need
to recognize that much more can and should be done to improve the conduct of arbitral
proceedings in India but most importantly, we feel that there is a need to effect a change in
perceptions. As our nation moves towards increasing litigiousness, alternative methods of
dispute resolution might just provide the key to resolving the problems of overburdened case
loads, long pendency of cases and an all too frequent case of justice being delayed. For long,
the problem plaguing the effective implementation of ADR methods has been their perception
as being subordinate to the court process- a perception shared and fostered by lawyers and
people alike. It is imperative, that this be changed and this can only be achieved if there is
active engagement from all the stakeholders in this process. Certainly, there are some disputes
inherently unsuited for alternative channels but there are so many more which fit perfectly
within the vision envisaged for a system of rendering justice that runs concurrent to the Courts.
It is necessary for the Courts themselves to mandate recourse to ADR methods in inter alia
international commercial disputes, employment disputes, matrimonial cases, compoundable
criminal offences, to name just a few Saw Pipe case’s expanded judicial review is especially
unsuitable in the Indian context where courts are overwhelmed with backlog. In such scenario
to permit a challenge on merits would considerably delay the enforcement proceedings. A
majority of parties opting for arbitrations do so to avoid court delays and legal niceties. An
unfortunate side effect of this decision is that it has become a ground for parties to shift the
venue of arbitration outside India. The Supreme Court’s decision (Venture Global Engineering
case) flies in the face of modern commercial practice. At the end of the day, what should take
precedence is the provision of justice, in substance more than in form. As our country grows
and flowers, taking wing on issues unimagined before, it is time also for our dispute resolution
systems, the undisputed backbone of our nation, to follow suit. At the end of the day arbitration
would see the day light of reality and true success when people would start accepting the

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arbitral award and its finality as that of a judgment by the Supreme Court not because it is
justice always but because it is final always, having no further appeal.

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 BIBLIOGRAPHY

Books Referred
1. Arbitration & Conciliation with ADR by Madhusudan Saharay, 4th Edition.

2. Constitution of India by Prof. M.P.Singh V.N.Shukla, 13th Edition

3. Arbitration and Conciliation by Dr. PC Markanda, 9th Edition

4. Arbitration, Conciliation & Mediation by Vishnu S Warrier.

5. Arbitration & Conciliation in India by Dr. N.V. Paranjape.

Websites Referred
1. https://www.legalmatch.com/law-library/article/what-is-an-arbitration-award.html
2. https://www.lexology.com/library/detail.aspx?g=8c489b6a-7fc5-44ef-80f3-
a56616272874
3. https://www.vakilno1.com/legalviews/arbitration-award-setting-aside-award-arbitration-
act.html
4. http://www.mondaq.com/india/x/691498/Arbitration+Dispute+Resolution/Issue+Of+Juri
sdiction+And+Execution+Of+Arbitral+Awards
5. http://www.legalservicesindia.com/article/433/Arbitral-Award-Its-Challenge-&-
Enforcement.html

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